The U.S. dollar rose sharply in forex on Tuesday evening, recouping all losses of the first half of the day amid the statements of Federal Reserve Chairman Jerome Powell about the plans to speed up the exit from quantitative easing programs.
The U.S. dollar index, which reflects the exchange rate against six key global currencies, jumped to 96.65 from 95.61 points, while the euro fell to $1.1272 per euro, losing more than 1% in half an hour, writes Finviz.
On Tuesday, Jerome Powell, who is nominated by Joe Biden’s administration for the second term at the head of the US central bank, appeared before the Senate Banking Committee and commented on the situation around the new strain of coronavirus, which has already scared the world markets and brought down the capitalization of stock exchanges by 2 trillion dollars during the “black Friday”.
The emergence of the omicron strain is creating “additional uncertainty about inflation” and could “exacerbate supply chain problems” while reducing people’s willingness to work full-time and slowing the labor market recovery, Powell said.
In this regard, the Fed at the next, December meeting may consider moving a few months ahead of the timing of the withdrawal of stimulus measures, he added.
Recall that since November, the Fed has been reducing the volume of asset purchases, gradually phasing out stimulus amid accelerating inflation, which in the U.S. is breaking records since the early 1990s.
Now the U.S. Central Bank pumps into the markets $ 105 billion a month, buying on the balance of mortgage and Treasury bonds. Since mid-December, this amount will be reduced to $90 billion.
According to the current schedule, the Fed will completely stop pumping money into the markets in June next year. And a few months later, according to futures contract quotations, the process of interest rate hikes will begin.
The market now lays at least two US rate hikes in 2022, and with 66% probability, even three steps up, although the Fed itself continues to insist that inflation is “temporary” and it is too early to think about raising borrowing costs.
‘Omicron’ scares the Fed: US central bank to accelerate policy tightening
